Selecting effective suppliers is an integral task for the Procurement department. It is important when doing so that there is consistency of approach between different buyers and various suppliers. Here’s a very simple but efficient way to make this happen. There are four aspects of a Supplier that you will need to evaluate. These are:-
The attitude of the provider This covers items such as:-
- A willingness to react to Your needs
- The capacity to respond to your needs
- The quality of the consultation with you on new product development
- The quality of market information they provide to you
- Initiatives in creating price reductions
Technical ability There are three elements of technical skill that you need to evaluate.
- Their technical competence
- Their process capacity
- Their control of these processes
Commercial aspects The Commercial aspects you might want to evaluate include:-
- Lead time to deliver goods Or services
- The positioning of the provider
- Delivery frequency
- Any minimum purchase amounts
- The proportion of programs that are full of full and on time
- Your appraisal of supply risk
- The purchase price
Financial standing There are three key evaluation criteria.
- The credit terms they offer To you
- Their credit score
- Key financial ratios like liquidity ratios return on capital and profit margins.
Once you have compiled your List of items to evaluate, here’s a fantastic way of deciding in your evaluation score. Rate the supplier being evaluated on a scale of 1 to 5 to each item in your list. The scores are determined as follows.
1 = bad and could not be Improved in the short term
2 = poor but could be improved with appreciable effort
3 = meets the standard required in most facets
4 = meets the standard required in most facets
5 exceeds all the standards
Would you like to learn more about effective procurement?
This is a whole subject on its own but commonly includes procurement process intelligence on trends and indices relating to market rates. After all, it is a good idea to find out that you are paying prices that are 10 percent less than last year however when the market as a whole has dropped by 20 percent your performance suddenly does not seem so great.